The politics of consensus has a dark side

Memory is a funny thing.  ''In the days of the Accord,'' Business Council head Tony Shepherd told an audience last week, ''different sectors were able to agree on a common purpose and a plan to foster productivity, competitiveness and growth ... there is no reason we cannot do this again.''

Shepherd is not alone.  Hardly a week goes by without another CEO recalling the ambitions of past governments, and lamenting the timidity of current ones.

Their story has been repeated so often it's become a banal cliché:  in the days of Bob Hawke and Paul Keating, businesses, government and unions put down their swords, held hands, and made beautiful microeconomic reform together.  We need to rediscover the politics of consensus and conciliation.  It's time for an end to partisanship and to get on with ... anyway.  It's boring to write, let alone read.  Imagine hearing it in a speech.

But let's be clear about what that cooperation would be in practice:  institutionalised collusion between big business and big government.

This is the unacknowledged truth behind the business lobby's complaints that Australia has left its reform era behind, or that politics is too divided to make the big historical changes.

Getting business and government around a board table isn't necessarily a good thing.  In politics, cooperation can be dangerous.

Big businesses are no fans of the free market.  They only like competition in the abstract.  In the real world, competition is traumatic.  So when they are given the opportunity to set the rules of the game, they always try to fix it in their favour.  That's why we talk so much about lobbyists.  That's why we talk about crony capitalism.  And that's why we talk about regulatory capture — when a business promotes regulation to shut down its competition.  The politics of consensus has a dark side.

One of Adam Smith's most famous quotes comes from his Wealth of Nations:  ''People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public.''

Most people citing Smith's warning leave it there.  You can see the appeal.  Business cartels are bad, said the neoliberals' favourite economist.

But he went on:  ''Though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies;  much less to render them necessary.''  That is, cartels are bad — so the government should be careful not to create them.

On Monday, Julia Gillard announced that she wanted to do just that.  Writing to the Business Council and the Australian Council of Trade Unions, she proposed a National Economic Reform Panel.  This new body would encourage Australia's biggest businesses, largest unions, and most well-connected community groups to build a national consensus on reform.

Happily, it won't go anywhere.  Remember Kevin Rudd's relationship with Sir Rod Eddington, announced in a flurry of publicity in the 2007 election?  It's not clear that Eddington gave any advice, or that Rudd took any.  The post-election Business Advisory Group didn't seem to go anywhere, either.  Similarly, it is doubtful historians will mark Julia Gillard's tax summit in June this year as a key moment in Australian economic history.

We are haunted by memory of the Accord.  When Hawke and Keating convinced the ACTU to restrain wages in return for social reforms in 1983, they created one of the few hero moments in Australian history.  In our national mythology, the Accord was a necessary first step for the liberalisations of the next decade.

But the Accord was explicitly corporatist.  It was a way to buy off the unions and (although they did not formally sign the Accord) a fair chunk of the business sector.  It may have brought these bodies inside the tent, but it also gave them new influence and power over government.

Yes, many special interests gained from the Accord.  But it does not follow that the Accord was in the general interest.

For instance, given Keating's later efforts liberalising the labour market, we forget that the Accord constituted one of the most significant increases in industrial relations control in Australian history.  To their credit, some unions recognised this.  Not all unions signed up.

By the end of 1980s, advocates of liberalisation were arguing that, by locking the biggest unions within the policy system, the Accord was actually holding back reform.  Privatisation, tax changes and tariff reduction were made harder, not easier, by the government's newfound special relationship with labour.  As Des Moore wrote in 1988, the Accord had granted unions a ''privileged position ... to defend their own narrow, short-term interest at the expense of the Australian community and of their own members''.

The politics of consensus is really the politics of privilege.  It's easy to understand why special interests want control over the levers of power, but it's hard to see why we would give it to them.

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